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Fincash » Mutual Funds » Ultra Short Term Mutual Funds

Ultra Short Term Bond Funds

Updated on July 26, 2021 , 5019 views

Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.

Ultra SHort Term Bond Fund

Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).

Ultra Short Term Bond Funds Features

Fund Type

Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.

For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.

Exit Load of Ultra Short Term Bond Funds

Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.

Returns of Ultra Short Term Funds

The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).

Redemption Ultra Short Term Funds

In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.

Minimum Amount of Investment

The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).

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Investment Avenues of Ultra Short Mutual Funds

Ultra Short Term Funds are fixed Income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.

Why Invest in Best Ultra Short Term Funds?

Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.

Taxation of Ultra Short Term Funds

In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.

However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.

Liquid Funds Liquid Funds Ultra Short Funds Ultra Short Funds
Class of Investors Individuals/HUF Corporate Individuals/HUF Corporate
Dividend Distribution Tax 27.038% 32.445% 13. 519% 32.445%
Short Term Capital Gains As per income tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates

(Please note, investors are advised to consult their Tax consultant before taking any decisions)

Best Performing Ultra Short Debt Funds to Invest FY 21 - 22

Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)
Nippon India Ultra Short Duration Fund Growth ₹3,197.25
↑ 0.30
₹1,2382.84.65.99.55.15.5
Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹30.6449
↑ 0.02
₹2,104124.58.47.57.9
ICICI Prudential Ultra Short Term Fund Growth ₹21.8696
↑ 0.00
₹10,3380.41.12.24.877.2
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 28 Jul 21

1. Nippon India Ultra Short Duration Fund

(Erstwhile Reliance Liquid Fund - Cash Plan)

The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments.

Nippon India Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 7 Dec 01. It is a fund with Low risk and has given a CAGR/Annualized return of 6.1% since its launch.  Ranked 62 in Ultrashort Bond category.  Return for 2020 was 4.9% , 2019 was 0.9% and 2018 was 7.3% .

Below is the key information for Nippon India Ultra Short Duration Fund

Nippon India Ultra Short Duration Fund
Growth
Launch Date 7 Dec 01
NAV (28 Jul 21) ₹3,197.25 ↑ 0.30   (0.01 %)
Net Assets (Cr) ₹1,238 on 30 Jun 21
Category Debt - Ultrashort Bond
AMC Nippon Life Asset Management Ltd.
Rating
Risk Low
Expense Ratio 1.09
Sharpe Ratio 1.08
Information Ratio 0
Alpha Ratio 0
Min Investment 100
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 5.32%
Effective Maturity 6 Months 27 Days
Modified Duration 5 Months 5 Days

Growth of 10,000 investment over the years.

DateValue
30 Jun 16₹10,000
30 Jun 17₹10,597
30 Jun 18₹11,253
30 Jun 19₹11,866
30 Jun 20₹12,098
30 Jun 21₹12,778

Nippon India Ultra Short Duration Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for Nippon India Ultra Short Duration Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21

DurationReturns
1 Month 2.8%
3 Month 4.6%
6 Month 5.9%
1 Year 9.5%
3 Year 5.1%
5 Year 5.5%
10 Year
15 Year
Since launch 6.1%
Historical performance (Yearly) on absolute basis
YearReturns
2020 4.9%
2019 0.9%
2018 7.3%
2017 5.8%
2016 6.8%
2015 7.6%
2014 8.4%
2013 8.5%
2012 9.2%
2011 9%
Fund Manager information for Nippon India Ultra Short Duration Fund
NameSinceTenure
Vivek Sharma1 Oct 137.75 Yr.
Kinjal Desai25 May 183.1 Yr.

Data below for Nippon India Ultra Short Duration Fund as on 30 Jun 21

Asset Allocation
Asset ClassValue
Cash38.2%
Debt61.8%
Debt Sector Allocation
SectorValue
Corporate41.4%
Cash Equivalent34.26%
Government20.3%
Securitized4.04%
Credit Quality
RatingValue
A3.46%
AA24.67%
AAA71.86%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
8.35% Govt Stock 2022
Sovereign Bonds | -
8%₹104 Cr10,000,000
↑ 10,000,000
182 DTB 02122021
Sovereign Bonds | -
8%₹98 Cr10,000,000
↑ 10,000,000
Piramal Capital & Housing Finance Limited
Debentures | -
4%₹55 Cr675
↑ 675
Mobil Trust Series 19
Unlisted bonds | -
4%₹50 Cr500,000,000
↑ 500,000,000
182 DTB 25112021
Sovereign Bonds | -
4%₹49 Cr5,000,000
↑ 5,000,000
India Grid Trust
Debentures | -
4%₹48 Cr400
↑ 400
Shriram Transport Finance Company Limited
Debentures | -
4%₹45 Cr450
↑ 450
Bajaj Housing Finance Limited
Debentures | -
3%₹41 Cr400
↑ 400
Indinfravit Trust
Debentures | -
3%₹40 Cr400
↑ 400
Ahmedabad-Maliya Tollway Limited
Debentures | -
3%₹38 Cr380
↑ 380

2. Franklin India Ultra Short Bond Fund - Super Institutional Plan

To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments.

Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.6% since its launch.  Return for 2020 was 4% , 2019 was 9.6% and 2018 was 8.7% .

Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth
Launch Date 18 Dec 07
NAV (28 Jul 21) ₹30.6449 ↑ 0.02   (0.06 %)
Net Assets (Cr) ₹2,104 on 30 Jun 21
Category Debt - Ultrashort Bond
AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd
Rating
Risk Moderate
Expense Ratio 0.52
Sharpe Ratio 2.95
Information Ratio 0
Alpha Ratio 0
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 0%
Effective Maturity 6 Months 19 Days
Modified Duration

Growth of 10,000 investment over the years.

DateValue
30 Jun 16₹10,000
30 Jun 17₹10,936
30 Jun 18₹11,774
30 Jun 19₹12,901
30 Jun 20₹13,495
30 Jun 21₹14,610

Franklin India Ultra Short Bond Fund - Super Institutional Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Purchase not allowed

Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21

DurationReturns
1 Month 1%
3 Month 2%
6 Month 4.5%
1 Year 8.4%
3 Year 7.5%
5 Year 7.9%
10 Year
15 Year
Since launch 8.6%
Historical performance (Yearly) on absolute basis
YearReturns
2020 4%
2019 9.6%
2018 8.7%
2017 8.2%
2016 9.7%
2015 9.7%
2014 10%
2013 10%
2012 10.3%
2011 9.4%
Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
NameSinceTenure
Santosh Kamath25 Oct 182.68 Yr.
Pallab Roy1 Jun 0813.09 Yr.

Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 30 Jun 21

Asset Allocation
Asset ClassValue
Cash49.67%
Debt50.33%
Debt Sector Allocation
SectorValue
Corporate50.33%
Cash Equivalent49.67%
Credit Quality
RatingValue
A57.08%
AA42.76%
AAA0.16%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
SBI Overnight Fund Dir Gr
Investment Fund | -
34%₹716 Cr2,120,378
↑ 289,887
Edelweiss Commodities Services Limited
Debentures | -
17%₹359 Cr3,650
↑ 3,650
Clix Capital Services Private Limited
Debentures | -
11%₹224 Cr2,350
↑ 2,350
PNB Housing Finance Limited
Debentures | -
9%₹191 Cr1,910
↑ 1,910
Clix Capital Services Private Limited
Debentures | -
9%₹191 Cr2,000
↑ 2,000
Clix Finance India Private Limited
Debentures | -
5%₹100 Cr1,000
↑ 1,000
Clix Capital Services Private Limited
Debentures | -
5%₹100 Cr1,000
↑ 1,000
Clix Capital Services Private Limited
Debentures | -
4%₹90 Cr900
↑ 900
U.P. Power Corporation Limited
Debentures | -
3%₹71 Cr938
↑ 938
Hinduja Leyland Finance Limited
Debentures | -
1%₹28 Cr280
↑ 280

3. ICICI Prudential Ultra Short Term Fund

(Erstwhile ICICI Prudential Regular Income Fund)

The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme.

ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.9% since its launch.  Ranked 27 in Ultrashort Bond category.  Return for 2020 was 6.5% , 2019 was 8.4% and 2018 was 7.5% .

Below is the key information for ICICI Prudential Ultra Short Term Fund

ICICI Prudential Ultra Short Term Fund
Growth
Launch Date 3 May 11
NAV (28 Jul 21) ₹21.8696 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹10,338 on 30 Jun 21
Category Debt - Ultrashort Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 0.96
Sharpe Ratio 3.53
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-1 Months (0.5%),1 Months and above(NIL)
Yield to Maturity 4.72%
Effective Maturity 6 Months
Modified Duration 4 Months 24 Days

Growth of 10,000 investment over the years.

DateValue
30 Jun 16₹10,000
30 Jun 17₹10,907
30 Jun 18₹11,612
30 Jun 19₹12,571
30 Jun 20₹13,559
30 Jun 21₹14,240

ICICI Prudential Ultra Short Term Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for ICICI Prudential Ultra Short Term Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21

DurationReturns
1 Month 0.4%
3 Month 1.1%
6 Month 2.2%
1 Year 4.8%
3 Year 7%
5 Year 7.2%
10 Year
15 Year
Since launch 7.9%
Historical performance (Yearly) on absolute basis
YearReturns
2020 6.5%
2019 8.4%
2018 7.5%
2017 6.9%
2016 9.8%
2015 9.1%
2014 14.8%
2013 3.1%
2012 9.4%
2011
Fund Manager information for ICICI Prudential Ultra Short Term Fund
NameSinceTenure
Manish Banthia15 Nov 164.62 Yr.
Ritesh Lunawat15 Jun 174.04 Yr.

Data below for ICICI Prudential Ultra Short Term Fund as on 30 Jun 21

Asset Allocation
Asset ClassValue
Cash49.41%
Debt50.59%
Debt Sector Allocation
SectorValue
Corporate42.93%
Cash Equivalent42.47%
Government14.6%
Credit Quality
RatingValue
A2.29%
AA31.49%
AAA66.23%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
182 DTB 19082021
Sovereign Bonds | -
6%₹622 Cr62,500,000
↑ 62,500,000
182 DTB 09122021
Sovereign Bonds | -
5%₹492 Cr50,000,000
↑ 50,000,000
182 DTB 16122021
Sovereign Bonds | -
5%₹492 Cr50,000,000
↑ 50,000,000
Embassy Office Parks Reit
Debentures | -
3%₹356 Cr2,887
↑ 2,887
182 DTB 23122021
Sovereign Bonds | -
3%₹295 Cr30,000,000
↑ 30,000,000
Talwandi Sabo Power Limited
Debentures | -
2%₹237 Cr2,362
↑ 2,362
The Tata Power Company Limited
Debentures | -
2%₹221 Cr2,084
↑ 2,084
Housing Development Finance Corporation Limited
Debentures | -
2%₹215 Cr2,130
↑ 2,130
Reliance Ports and Terminals Limited
Debentures | -
2%₹204 Cr2,019
↑ 2,019
Manappuram Finance Limited
Debentures | -
2%₹203 Cr2,000
↑ 2,000

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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